Auditor Conservatism and Voluntary Disclosure: Evidence from the Year 2000 Systems Issue

20 Pages Posted: 19 Mar 2003

See all articles by Peter Clarkson

Peter Clarkson

University of Queensland - Business School; Simon Fraser University (SFU) - Beedie School of Business; Financial Research Network (FIRN)

Colin Ferguson

University of Melbourne - Faculty of Business and Economics (Deceased)

Jason Hall

University of Michigan, Stephen M. Ross School of Business

Abstract

This study further examines the phenomenon of conservative auditor behaviour by considering the level of voluntary disclosure of Year 2000 remediation information in company annual reports. Previous studies have provided evidence of conservative auditor behaviour by examining the link between Big 6 auditor choice and accruals (Francis and Krishnan 1999; Becker et al., 1998; Defond and Subramanyam 1998). Protecting their reputation capital increases Big 6 auditor incentives to act conservatively to avoid litigation risk. We propose and find that Big 6 auditor clients disclose more Year 2000 remediation information than non-Big 6 auditor clients.

Keywords: Auditor conservatism, Voluntary disclosure, Y2K, Year 2000 remediation programs

JEL Classification: C21, G39, M41, M45, M49

Suggested Citation

Clarkson, Peter and Ferguson, Colin and Hall, Jason L., Auditor Conservatism and Voluntary Disclosure: Evidence from the Year 2000 Systems Issue. Accounting and Finance, Vol. 43, pp. 21-40, 2003. Available at SSRN: https://ssrn.com/abstract=376506

Peter Clarkson

University of Queensland - Business School ( email )

Brisbane, Queensland 4072
Australia

Simon Fraser University (SFU) - Beedie School of Business ( email )

8888 University Drive
Burnaby, British Colombia V5A 1S6
Canada

Financial Research Network (FIRN) ( email )

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

Colin Ferguson (Contact Author)

University of Melbourne - Faculty of Business and Economics (Deceased)

Jason L. Hall

University of Michigan, Stephen M. Ross School of Business ( email )

701 Tappan Street, Ross School of Business
University of Michigan
ANN ARBOR, MI MI 48104
United States
+1 734 926 6989 (Phone)

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